AIIB approves $490m non-sovereign financings

The Beijing-based lender is making its first investment in China’s power sector, while mobilising private sector capital with a syndicated senior loan for a telecoms project in Oman.

The Asian Infrastructure Investment Bank has approved two non-sovereign financings of around $490 million in total for a coal-to-gas conversion project in Beijing and a nationwide fibre-optic broadband network in Oman.

The Beijing-based multilateral is making its first investment in China – providing a $250 million corporate loan to the Beijing Gas Group Company, a state-owned gas distributor, for the development of the Beijing Air Quality Improvement and Coal Replacement Project.

The $761 million scheme will construct natural gas distribution networks in around 510 rural villages and low-pressure gas pipelines and household connections, with gas consumption meters to be installed in Beijing’s suburbs.

The project aims to reduce coal use by 650,000 tonnes annually and improve the city’s air quality by converting to “cleaner” gas upon completion in 2021.

AIIB’s other non-sovereign-backed transaction is a senior debt loan of up to $239.2 million to support Oman Broadband Company’s roll-out of a nationwide broadband network. The telecommunications group, which is backed by the local government, will kick-start the first phase of the $467 million project with the AIIB financing.

Phase one will focus on Muscat and other urban areas of Oman to provide fibre-optic broadband connections to approximately 406,000 residences and businesses. It will make 80 percent of Muscat ready for connection by the end of 2021.

The scheme is part of the country’s drive for economic growth, with Oman believing a faster, more reliable broadband network will attract manufacturing businesses and strategic logistics services and shift its economy from a reliance on exporting hydrocarbons.

“This non-sovereign debt investment is a great example of AIIB’s increasing capacity to independently structure financing in innovative ways,” said DJ Pandian, chief investment officer of AIIB, referring to the Oman project.

“In addition, the loan will be partially syndicated and will demonstrate AIIB’s ability to introduce private investors to new markets and new project types to support the development of vital national infrastructure,” he said, adding that the transaction is the first standalone non-sovereign-backed limited recourse financing that involves mobilisation of private capital through syndication.